These days, the phrase “anti-corruption” is perhaps among the most common to be found in the Chinese media, and it echoes through all levels of public discussion. The GlaxoSmithKline bribery scandal has created panic among some multinational executives in China, particularly within the pharmaceutical industry. A number of government officials at various levels, as well as senior managers of state-owned enterprises, have been greatly concerned too, fearful that they might be next in line as top leaders strive to build a corruption-free government.

The anti-corruption campaign’s achievements have garnered muted praise from the public, yet this is just the prologue to a “New Long March” that the Communist Party will have to endure.

The original Long March, which started in 1934, was without doubt the bitterest struggle the party has ever faced but, fortunately, it enabled it to recover from the brink of failure.

In the eyes of many, the ongoing war against corruption is also a life-and-death matter, not only for the party, but also for the country as we know it. But it is worth noting that there is concern, both domestically and internationally, that the anti-corruption campaign might create another uneven playing field in China’s business and political environments.

As an example, GlaxoSmithKline has admitted that its executives did indeed bribe some doctors and health care officials in order to boost its sales in China. Nobody would argue about the legality of such behaviour; it definitely violates Chinese law. Bribery is top of the list as a means of facilitating corrupt activities worldwide, and it cannot be tolerated in any country.

However, as one informed analyst, with the backing of many others, has said: “In reality, who does not bribe the doctors and officials in the Chinese pharmaceutical industry? It is a very common practice and many companies are doing it. Compared to the multinationals, local enterprises are even worse because they have poor products and barely conduct any research and development on new drugs.”

So, it seems that GSK’s behaviour is not an isolated case but, sadly, an industry practice which has existed for years. So, why has it been singled out for investigation? Why has it become the “lamb to the slaughter” in the current anti-corruption campaign? And why has this case received especially intensive coverage from CCTV, the most influential and popular state-owned broadcaster, boasting more than one billion viewers? Such coverage is rare in the extreme.

There are a few possible reasons, but they might not paint a complete or concise picture. First, the whistle-blowing by a former GSK executive – plus the fact that it is a large drug manufacturer – makes it the perfect target for the anti-corruption campaign in its bid to fight both “tigers and flies”. Second, health care costs have surged in recent years, and it is well known that corruption is one of the major causes of increasing expenses in the sector. Third, some pharmaceutical multinationals have blatantly disregarded, or at least did not take seriously, the directions from regulatory authorities to reduce prices as a part of health care reform.

Nevertheless, given that bribery is a common practice, many executives from both Chinese and foreign-owned pharmaceutical companies could face jail terms if the investigations spread.

And it’s not just the health care sector; the whole Chinese business world is heavily polluted with corruption, in the form of bribes, kickbacks, patronage and back-door deals. Thus, as the anti-corruption campaign continues, it is generating a great deal of fear throughout many parts of society. In a worst-case scenario, this could create social unrest, and may even drive the country into chaos.

Furthermore, there are fears that the crackdown targeting government officials and party members might be used to strike down political enemies, such as may have happened in the case of the disgraced former Politburo member, Bo Xilai – and as may be happening now with the investigation of former State-owned Assets Supervision and Administration Commission head Jiang Jiemin – rather than being used to reinforce strong and honest governance.
The campaign itself is a double-edged sword: on one hand, it will alleviate corruption and hopefully ease social inequality and conflict; on the other, its misuse could create unforeseen disasters especially in the event of mass political dogfights and wild accusations. Therefore, China should urgently develop a more mature anti-corruption mechanism.

It seems top leaders are serious in their fight against corruption, and they appear determined to strictly execute their measures to combat the scourge, both now and in the long term. Given how deeply ingrained corruption is in the country, it will take years of hard and sometimes harsh work to deal with the problem. At this stage, the whistle-blowing mechanism is probably still an effective tool, but it is definitely not a long-term strategy.

The whole world is watching to see what the next move will be in the campaign, as this affects more than just Chinese and international business leaders and entrepreneurs. It is vital to be fair, keep all action open and above board, and ultimately bring evil to justice. Unreasonable action could threaten a large group of elite and would most likely result in huge capital flight, damaging China’s economic accomplishments and possibly pushing the nation into an abyss.
Fortunately, as we have seen from the high level of openness in Bo’s trial, key leaders seem to realise that preserving transparency and integrity is crucial in anti-corruption cases.

It can only be hoped that there will be no great surprises and the anti-corruption campaign will follow a steady and persistent course. That way, we can expect China to play a leading role in the global economic recovery well into the future.

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About Alberto

Alberto Forchielli, born in 1955, received an MBA with honors from Harvard Business School and a bachelor’s cum laude in Economics from the University of Bologna. He is a founding partner of Mandarin Capital Partners, and the founder and president of Osservatorio Asia, a non-profit research center focused on Asia. He is also the founder of T-Island, a consultancy agency specialized in international relocations for professionals. In addition, he guided the expansion of the Roland Berger Foundation to Italy, which provides individual support for talented students lacking means to further their educations.